AT&T posted strong results today as its iPhone activations outpaced those of competitor Verizon Wireless during the first three months of the year.
The operator activated 4.3 million iPhones, compared to the 3.2 million sold by Verizon. In all, AT&T sold 5.5 million smartphones.
"Strong smartphone sales drive data sales, and data drives this business," AT&T Mobility President and CEO Ralph de la Vega said during an earnings call today.
Mobile data is now a $24 billion annualized revenue stream for AT&T, he said. In the first quarter alone, AT&T posted data revenues of $6.1 billion.
The high cost of subsidizing smartphones often erodes operators' profit margins, but AT&T managed to dodge the financial impact of the high-end devices. Income for its wireless segment rose 11 percent to $4.37 billion on sales of $16.13 billion, and operating margin for its wireless business rose to 27 percent, from about 26 percent last year.
Overall, the company made $3.6 billion, or 60 cents per diluted share, on sales of $31.8 billion, beating analysts' estimates of 57 cents per share.
De la Vega said some of the margin improvement was due to cost-containment measures and the close of the Alltel-Centennial merger.
Profit margins could continue to improve in future quarters as the effect of new data plans, costlier upgrade fees and new upgrade policies put in place earlier this year begin to have an impact, he said.
About two-thirds of AT&T's smartphone subscribers have moved to more profitable tiered data plans. Costly device upgrades dropped to 7 percent during the first quarter from 9 percent last year.
Postpaid ARPU came in at $64.46, and postpaid churn dipped to 1.1 percent, its lowest level in seven quarters.
AT&T's overall customer additions dipped on an 82 percent drop in new connected devices, which de la Vega attributed in part to Wi-Fi-only tablets that don't access AT&T's cellular network.
AT&T added just 230,000 net new connected devices during the first quarter, from 1.27 million last year. Reseller net adds also slipped, falling 67 percent to 184,000.
However, net new postpaid customers tripled to 187,000, and prepaid subscriber growth rose 47 percent to 125,000. AT&T's subscriber base now stands at about 104 million, with about 41 million of those customers using smartphones.
De la Vega dismissed speculation that the wireless industry had no room to grow since nearly every U.S. resident already owns a cell phone.
"I think we're on the verge of a tipping point with the mobile Internet," he said. "From here on out, you can expect to see more increases of people accessing the Internet on their mobile devices."